G.R. No. 25954 , December 18, 1926
THE UNITED STATES OF AMERICA, plaintiff-appellant, vs. JUAN GISBERT and RICARDO CABALLERO, defendants-appellants. RUIZ, REMENTERIA Y CIA., S. EN C., intervenor-appellant

FACTS

The United States of America (plaintiff) chartered its steamship “Lake Farmingdale” to Juan Gisbert under a charter-party agreement. Gisbert initially secured a surety bond from the Philippine Guaranty Company. Later, Ricardo Caballero deposited P20,000 in cash with the plaintiff to replace the surety bond, as evidenced by a receipt stating the money was to secure Gisbert’s faithful performance of the charter-party. Gisbert defaulted on payments for charter hire and insurance premiums. The plaintiff rescinded the contract, repossessed the vessel, and incurred expenses for repairs and other charges. The plaintiff filed a complaint seeking to recover amounts due from Gisbert and to apply Caballero’s P20,000 deposit against the judgment. Gisbert claimed he had transferred his rights and obligations to Caballero. Caballero argued he was relieved as surety due to a subsequent demand by the plaintiff for additional security. Ruiz, Rementeria & Co. intervened to recover payment for provisions supplied to the vessel.

The trial court rendered judgment against Gisbert and Caballero for P7,232.50 (representing one month’s charter hire and insurance) and ordered the plaintiff to return the P20,000 to Caballero after deducting the judgment amount. It also granted the intervenor’s claim against Gisbert. All parties appealed.

ISSUES:
1. Whether the plaintiff is entitled to recover more than one month’s charter hire and insurance premiums from Gisbert.
2. Whether the plaintiff is entitled to apply Ricardo Caballero’s P20,000 cash deposit to satisfy Gisbert’s total indebtedness.
3. Whether the intervenor, Ruiz, Rementeria & Co., has a valid claim against the plaintiff or the vessel for the supplies furnished.

RULING

1. Yes, the plaintiff is entitled to recover for the full period of default. The Supreme Court modified the trial court’s award. The plaintiff was entitled to recover not just for one month, but for the entire period from the due date of the first unpaid installment until the vessel was sold, amounting to P8,518.66 (covering charter hire, insurance premiums, repairs, and other expenses), with legal interest.

2. Yes, the plaintiff is entitled to apply Caballero’s P20,000 deposit. The Court held that the cash deposit was delivered for the specific purpose of guaranteeing Gisbert’s performance under the charter-party, effectively replacing the original surety bond. Caballero, having paid the money for that purpose and accepted a receipt specifying it, was estopped from denying its application. The plaintiff could rightfully retain and apply the deposit to satisfy the judgment against Gisbert, with any surplus to be returned to Caballero.

3. No, the intervenor has no valid claim against the plaintiff or the vessel. The charter-party expressly stipulated that the vessel, being government-owned, was to be kept free from all liens except for crew’s wages and salvage. Notice of this restriction was required to be posted on the vessel. Therefore, neither the plaintiff (as owner) nor the vessel itself was liable for supplies like groceries purchased by the charterer or captain.

DISPOSITIVE PORTION:
The Supreme Court MODIFIED the trial court’s judgment. It entered judgment in favor of the plaintiff against defendants Juan Gisbert (as principal) and Ricardo Caballero (as surety) for the sum of P8,518.66 with legal interest from October 29, 1924. The plaintiff was ordered to satisfy this judgment from the P20,000 cash deposit and to return any remaining balance to Caballero. The judgment in favor of the intervenor against Gisbert was affirmed. No costs were awarded on appeal.